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Date Posted: 16:09:40 01/28/03 Tue
Author: j
Subject: Ch23 - Organizing the Economy for War

I. Organizing the Economy for War
A. Financing the War
i. by the time the war ended, the US gov. had $32 bil. To spend for the war
a. for the time, this was huge b/c the national budget had never exceeded $1 bil. Before 1910
ii. Raising the Money
a. Liberty Bonds
- a way for the gov. to fund the war
- b y 1920, the US had earned $23 bil.
b. new taxes bring in up to $10 bil.
- many taxes were from corporations where steeply graduated income and inheritance taxes had rose as high as 70% in some tax brackets
B. Organizing the economy to meet war needs
i. Wilson proposes 2 very different plans: A Council of National Defense, and a Civilian Advisory Commission
a. the Council Of National Defense
- composed of members of Wilson’s cabinet
- many wanted a more centralized approach
- instead of dividing the economy geographically, they divided it functionally (i.e. one sector to supervise transportation, another for agriculture, and another for manufacturing, etc.)
- as a result different boards were created to oversee things like the railroads, fuel supplies, and food handling
- these boards were not w/out weakness, but they did meet the war needs w/out paralyzing the domestic economy
b. Civilian Advisory Commission
- set up local defense councils in every state and locality
C. War Industries Board
i. coordinated gov. purchases of military supplies
ii. at first the board was casually organized until 1918 when Wilson appointed prominent Wall Street financier, Bernard Baruch to control it
a. he basically told which factories to produce what war materials that were needed and set their prices
- also, in times of supply scarcity, he decided where the products we did have would go
- and when corporations were fighting for gov. contracts, he chose among them
iii. in reality, the board was plagued with mismanagement and inefficiency
a. it was less important to meet the nation’s war needs than it was to see the full extent of America’s resources and productive capabilities
- Baruch displayed himself as the partner of business
- men who took paid leave from their jobs to work for the government were given exemption from antitrust laws by Baruch
D. Lessons of the Managed Economy
i. accomplishments
a. Herbert Hoover’s efficient organization of domestic food supplies
b. William McAdoo’s success in untangling the railroads
ii. slow progress
a. many products ordered for the war weren’t even finished when the war ended
iii. many leaders of gov. and industry learned the importance of a close relationship between public and private sectors and many hope to continue experiments w/ this idea during peacetime

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